Secret Weapon Investors Use at Property Auctions

If you are interested in bidding on a piece of property at auction you must be familiar with the best practices and rules in place in the county where the property is being foreclosed upon and is scheduled to be auctioned for sale.

For example, one of the most sensitive rules is about payment. You will need immediate access to cash. If you have a self-directed Individual Retirement Account (IRA) you will be challenged to have your administator make funds available to you in a timely fashion. But there is a secret weapon savvy property investors can use to get around this hurdle.

Here are some tips you may find helpful to know:

Notice of Real Estate Auctions
Real property auction notices will typically be posted as legal ads in the local newspaper. These ads will have the terms of the sale. In addition, the auction listings are usually available online. For example, in Charleston County, South Carolina, the current running list of foreclosure properties scheduled for the auction block are available online.

Real Estate Auction Schedule
The county will usually have a set day (or days) and time each month that real estate auctions are conducted. The location will also be constant and is often the front steps of the county courthouse or in front of the property itself. In some cases, such as Lee County, Florida, foreclosure auctions are conducted online. Find out well ahead of time if pre-registration is required to bid. Visit your county website or call their office to learn the specifics.

Pitfalls of Buying Property at Auction
In most cases you will have no official knowledge of the physical condition of any of the properties listed. Keys are not available. Clear property title will not be guaranteed. Bidders should visit the property ahead of the auction and conduct their own research. Remember, if any property taxes are due they will be the responsibility of the successful bidder. Definitely perform your due diligence prior to utilizing your self-directed IRA dollars to purchase a property.

How to Pay for A Property at Auction
If you are the successful bidder at a foreclosure auction, you will have a short amount of time to pay at least a percentage of your bid. Usually this must be done the same day. Payment is accepted via cash or certified funds. Depending on the county, you may have only hours or up to 30 days from the date of the sale to fully comply with the terms of the sale. Failure to comply could result in the forfeiture of your deposit, loss of your right to bid at future auctions, and the responsibility for associated cost for the re-sale of the property. Check with your county for specific rules so you are prepared to comply.

Sam Lurie of Fort Myers Beach Florida is a real estate broker and investor who utilizes his self-directedcheckbook-control IRA as his secret weapon to pay for property purchases. Lurie says "as a retired IRS Enrolled Agent I have recommended the checkbook-control IRA to friends and clients. I have used it several times to purchase properties. It facilitates a hassle-free purchase or sale and is a great vehicle for purchasing tax certificates, tax deeds, foreclosures and properties on the open market."

As discussed in the first installment of this series on self-directed IRAs, the product is a great tool for investing in property, precious metals, tax notes, private loans and more. Checkbook control self-directed IRAs, when structured properly, provide serious property investors an upper hand when fulfilling their obligations of a winning auction bid.